Private charter provider JetSetGo’s aircraft leasing unit will start operating from GIFT City next month, when it brings in a Hawker 850.
With the Hawker 850, JetSetGo is looking to become the first Indian aircraft leasing company, founder Kanika Tekriwal told Moneycontrol in an interview. However, the first plane will be leased to the holding company to test out the feasibility of the leasing model in India. The company plans to bring in six aircraft by the end of 2021-22.
Edited excerpts:
By when can we expect the first aircraft under JetSetGo’s leasing arm to come to India?
We’re pretty much done now, more or less. I’m hoping to bring in the first aircraft in the next month. It’s going to be a Hawker 850.
We’re just waiting for clarity regarding customs duty, import procedures, etc., because there are so many departments involved in the import of aircraft. For example, airports don’t have parking permission. So, at which airport does the aircraft land? The government is still working on that.
I think we are facing issues because we are among the first aircraft leasing companies in India and this is our first aircraft coming into India… So obviously, we’ll probably set the pathway to make everyone’s lives easier.
Have you reached a leasing agreement for the first aircraft?
Yeah, absolutely. What we’ve done is the first aircraft we’re going to lease to JetSetGo itself… We want to make sure leasing of aircraft is feasible in India before we go into customer commitments, see how it works out for the first three months because it is a huge deal.
So our thought process was, you know, let’s make ourselves the guinea pigs… at least things are in our control. And if things don’t work out very well, we have the option of sending the plane back.
The plan is to wait for at least 60 days from the date of the first plane landing and then take it from there… Right now the civil aviation ministry and the DGCA (Directorate General of Civil Aviation) have been super helpful because they are aligned to making this work, but customs are a little grey on how the whole thing is going to work. Similarly, airports are a bit grey – they don’t know where they want to land the new aircraft, whether to land it in an SEZ or an Indian zone.
We are planning to bring in at least six aircraft by the end of 2021-22. But it's all subject to how this first plane goes. In total, we are looking at about an $18 million outlay. Hopefully, by the end of next year, 2022, we are also looking at leasing planes to international locations.
What has been the interest with regard to leasing the six aircraft?
I think ownership is obviously a very expensive option… The private aviation market in India has opened up a lot in the last two years. The market size has increased, the customer base has gotten bigger.
Our main reason for getting into the aircraft leasing business is because whenever we would go to a leasing entity abroad over the last four years, they asked us to take the plane from them, operate it abroad, give us a guarantee abroad – they don’t want anything to do with India.
So we said, you know, if that is going to be the case, then we will do something to make India work.
The interest till now has been quite moderate because I think we haven’t done much work on actually marketing our leasing arm. We know where the customers are, we know where the interest lies. But I want to be sure about a product before selling it.
In fact, customers keep asking us when they read about it and when they come to know about it, they come to us and keep asking us. So that means there is a substantial number of people who actually want to do this.
What is the financial model planned for leasing out these aircraft?
We’re coming up with various models. The standard way in which aircraft leasing works is a 1 percent per month model, where the lessee pays 1 percent of the cost of ownership to the lessor.
We want to be innovative, we want to go into different models. We are looking at a pay-as-you-use programme, where depending on how much the aircraft flies we get paid. We are also exploring revenue-share models.
We want to figure out a model where we get more and more people to lease aircraft by minimizing risk for both ourselves as well as the customers.
Globally, people lease aircraft on the fixed monthly model, where they pay in the range of 0.8 percent to 1.2 percent to lease an aircraft.
You said the Indian private aviation market has really opened up. Could you elaborate?
Pre-COVID, a customer could charter planes from their balance sheet or using their personal wealth, but customers were hesitant. It had a perception of waste of money. It had a perception of wasteful expenditure and luxury, and people would prefer to travel commercially.
Since the skies opened up after the COVID-19-induced lockdown last year, customers are looking at chartering flights to ensure their safety. We’re seeing this across the platform. A lot of customers who never thought they would charter a plane or who would only charter for business or would rarely charter have now started chartering planes a lot now. I would say we’ve seen at least 30 percent of our new customer base come in in the last six months.
I think it’s about a new normal, where some people are moving away from trains and are looking to figure out ways to get the cheapest airline tickets. I think that’s the same trajectory seen in the chartering business, but not as voluminous as people transiting from trains to commercial airlines.
But I think once people start using chartered planes, they’re getting used to spending the money and will figure out how to share chartered flights. It is going to be here to stay in the long term.
A lot of new startup founders, who would earlier never use chartered planes, have started to use our services. Friends pool in money and lease out a plane.
What has been the impact of rising fuel prices on your business?
It is impacting us. It always remains in the back of our mind… but what also impacts us a lot is the foreign exchange rate because 70 percent of our payments are made in foreign exchange.
So as the foreign exchange rate increases, our cost of operation increases. As fuel increases, our cost of operation increases and we don’t necessarily pass on this cost to the customer most times. So, obviously, it is a cause of concern. And if it continues to happen, at some point we have to pass on the cost to the customer.
Are you planning to add smaller planes to offer chartered flights at lower rates?
Absolutely. We are looking at leasing turboprops and small jets, hopefully by the start of the next financial year, which can serve smaller sectors and shorter routes. Currently, we operate at between about Rs 1 lakh per hour and go up to about Rs 7 lakh per hour for a Gulfstream 650 or a Global 6000. But with our smaller planes coming in, we can look at even cheaper rates.
In 2021-22, we’re hoping to clock around Rs 150 crore.
In terms of the struggles COVID has brought, is the fact that foreign countries are not offering visas to Indian customers a very big concern?
Oh, yeah, absolutely. It’s a huge concern because customers are wanting to travel, willing to travel.
I think there’s nothing much anyone can do. Personally, the government’s doing whatever they can to curtail COVID. We’re trying to vaccinate as many people as possible. And you’re seeing the effects of that… Switzerland has opened up to Indian vaccinated passengers.
I just think we need to be a lot more proactive in talking to other countries and you know, convincing them to at least allow vaccinated people to travel. But I also think a lot is going to be determined by what the third wave of COVID-19 brings in. How many vaccinated people actually get affected – that’s really going to show us where the world is heading.
How did COVID-19 impact your bookings in 2020-21?
Once the lockdown was lifted in May, the first few months were very slow. In July, August and September there was barely any flying because people were so scared to travel. We also took a hit to our business as people adapted to the new normal and shifted to Zoom and WebEx for meetings.
Around 80 percent of our business came from business clients. It came from people traveling for business – 80 percent of the travel industry is dominated by business travel. So, until business travel picks up again, I don’t think the travel industry will really bounce back. We are hoping that the industry bounces back by the end of this year, by November or December.
Are you looking at a weekly model to start flying between select cities?
We did something like that called ‘sky shuttle’ in 2019, the year before COVID. And we connected Bengaluru-Mumbai and Bengaluru-Hyderabad on a six-seater plane. But I don’t think the time is right for that now because business travel has fallen a lot. So, hopefully, by the middle of next year, when business travel actually picks up, we would look to launch such a service again.
We are looking to use three planes for such a service – two for flying and one as backup and then slowly growing it. The key sectors we’re looking at are Hyderabad-Delhi, Hyderabad-Bengaluru, Mumbai-Delhi and Mumbai-Bengaluru.
What can the government do to promote the charter air service industry?
To give you a simple example, if you buy a plane and register it in San Marino or the UK or America, the plane starts flying within 25 days, 30 days of buying it. In India, that same procedure takes anywhere between 60 to 120 days, which is horrendous.
So I think the government needs to rework regulation and import procedures a lot. The biggest thing that the government can do is create a different set of regulations for private airlines. Currently, the regulations for commercial airlines and for private jets are the same.
What would be the current size of the Indian chartered air service market and how do you expect it to grow in five years?
I think overall, the industry would be made up of around 80 private jets operating in India right now and we are operating about 22 of those planes.
We’re hoping to expand the fleet to at least 45 planes in the next five years and expect the industry to grow to a size of around 200 planes by then.
